DoD Is Open for Business—Here’s Why Industry Must Follow Suit

Robust discussions around U.S. capabilities in the Great Power Competition unfolded between top Defense Department leaders and industry partners at the AFCEA WEST conference in early March. Most attendees likely didn’t anticipate this would be the last in what is typically a series of must-attend events for the defense industrial base. But here we are.

In the midst of our current climate of uncertainty, it’s increasingly clear that the mission of the DoD must continue to move forward. Likewise, so must the business of providing the military with the equipment, technologies and services needed to maintain national security and the competitive advantage.

Even ahead of the unfolding details and unknowns linked to COVID-19, WEST was a valuable forum for discussing today’s military challenges and technologies, as well as for comparing notes on and within the defense industry. In talking with representatives from several companies that provide goods and services to the DoD, there were clear trends in what we’re seeing and experiencing as contractors.

While some of these trends will shift as the COVID-19 pandemic deepens in the U.S. and other countries, increased readiness remains a top priority among U.S. military leaders. To that end, operations in support of readiness will continue as we work together to protect our communities, ensure continuity of functions critical to public health and safety, as well as economic and national security.

With the DoD still open for business, 2020’s key trends remain applicable despite likely shifts in priorities and timelines. Here are three market observations that can be expected to hold steady — requiring industry to stay on course of commitments made — even as circumstances continue to evolve.

Uncertainty and scrutiny are slow-rolling development, acquisition and deployment

Fiscal 2020’s series of temporary appropriations continued a well-trodden journey of tentative progress, illustrated across defense programs from technology insertions to big-ticket buys like the F-35. This translated into multiple primes reporting a lower number of orders captured and slower business for industry in the first half of the fiscal year.

Budgetary uncertainty has been accelerated by increased scrutiny as the current administration demands greater visibility into programmatic planning, fiscal strategy and acquisition rationale. The legislative magnifying glass, while justifiable, is intensified by a general unwillingness in Washington to play nicely in the sandbox. As the services face increased (and heated) congressional oversight, the paralytic effects of uncertainty and scrutiny extend throughout the entire contracting process.

Acquisition is caught in political crosshairs

With contract awards already slowed by ambiguous funding and expanded oversight, acquisition as a whole is under intense political pressure. Leaders charged with buying decisions face questions not just from Congress, but also from the broader acquisition community and industry.

Today’s acquisitions too often face near-inevitable contract award protests. Front and center of this phenomenon is the Pentagon’s $10 billion JED contract, which has attracted attention as high up as the Oval Office and coverage across the nation’s biggest news outlets. The flood of award protests coupled with the threat of unwanted attention is another factor in the services exercising extreme caution and proceeding slowly with acquisition activities.

DoD is fast-tracking top priorities while supply-chain concerns rise

Predictably, defense acquisition officials are ensuring ample funding gets routed to mission-critical capabilities, and in some cases, manufacturers are being asked to step up delivery. At WEST, there was significant emphasis on high-priority radar and electronic warfare (EW) systems. This isn’t a surprise given that EW, long neglected amid investment supporting operations in Southwest Asia, is now in demand in near-peer competition.

Supply chain worries also surfaced at WEST. The presence and remarks of Pacific-based DoD officials overlapped with concerns about equipment and supplies originating in Asia, where the possibility of factories idled by COVID-19 response raised questions about constricted manufacturing and the ability to fulfill customer demands. We’ve already seen some companies lower their yearly financial expectations for this reason, and undoubtedly, we will see more downgraded fiscal adjustments.

The reality is we are facing unprecedented circumstances worldwide — not just in defense, but in all markets and our daily lives. Nonetheless, as Defense Secretary Mark Esper told Congress just before WEST, the DoD’s “first priority is protection of our people, both service members and families, and then make sure we protect our ability to accomplish our mission.” Even as the military faces the same rapidly changing conditions as the rest of us, that mission will continue. So, too, must industry’s support to that mission — along with the ability to roll with the punches accordingly.